The $3.2bn China-funded Standard Gauge Railway is Kenya's largest post-independence infrastructure project. AFP
The $3.2bn China-funded Standard Gauge Railway is Kenya's largest post-independence infrastructure project. AFP

China in Africa: an increasingly uneasy marriage of interests



Late last month in Nairobi, Li Xuhang, China’s ambassador to Kenya, threatened a trade war with the East African nation. This came after a call from Kenya’s President Uhuru Kenyatta to halt imports of Chinese tilapia, which he believed were flooding the market and harming the local fishing industry. The Chinese government responded angrily, saying it would impose its own sanctions on Kenya. It also warned that it could pull phase-two funding of the Standard Gauge Railway (SGR), which will link Nairobi with Mombasa, Kenya’s main Indian Ocean port. The SGR has been financed by the People’s Republic and, at an estimated cost of $3.2 billion, is the most expensive post-independence infrastructure project in Kenya.

After a few days, the rhetoric cooled. The tilapia ban went ahead, but China walked back on its threat of retaliatory action, saying that its strategic partnership with Kenya would not be affected and that it would not “even associate the issue of fish import with other co-operative projects”. It also promised that it would continue to foot the bill for the SRG. However, these events illustrate a growing tension in Sino-African relations.

In recent years, China has offered an appetising menu to African leaders: loans, development aid and infrastructure funding, in exchange for access to the continent's abundant natural resources and emerging markets. For example, as part of its Belt and Road Initiative, China has financed a $4bn railway connecting landlocked Ethiopia with the port of Djibouti, where it has also opened the first phase of a $3.5bn project to create Africa's largest free-trade zone. Meanwhile, in Zambia, it is building a $548m cement plant.

With Chinese foreign policy underpinned by the principle of non-intervention in the sovereign affairs of other nations, such investment has come – conveniently for many African leaders – free of conditions or criticism on matters of democracy and human rights.

As China’s role in Africa has matured, the results of its investments have begun to be seen. Among the successes lie half-finished projects, such as a widely reported ghost town in Angola, environmental damage and spiralling debt. The Ethiopian railway project came in 30 per cent over budget. Although it was originally meant to be paid off in 10 years, in September China agreed to extend the repayment schedule to 30 years. Now, across the continent, there are increasing concerns that African nations are selling their souls to China.

In recent months, China has faced a growing backlash – not from governments, but from everyday people. Nowhere has this been more apparent than Kenya, which owes 72 per cent of its bilateral debts to China. Kenyan civil society is dynamic, and its media operates largely unhindered. Headlines have criticised China’s role in national affairs, and stories have emerged of mistreatment of Kenyan workers on the SGR project. In September, Kenyan authorities arrested a Chinese businessman after a video surfaced online of him calling Mr Kenyatta “monkey people”. The country’s social media community has been incandescent about all of these issues.

In copper-producing Zambia, a nation heavily in debt to Beijing, China has been accused of using loans to create openings in government-run bodies, such as the national electricity company and the state broadcaster. The Zambian government denies these claims, but that didn’t stop protesters taking to the streets of Lusaka in September. Some wore T-shirts emblazoned with the slogan “sayno2china”; one man carried a banner reading “China = Hitler”.

Such expressions of dissent follow a hundreds-strong gathering in Uganda last year. There, members of the crowd voiced their fury that an influx of Chinese entrepreneurs had entered the country as major investors, then proceeded to set up shop as small traders, undercutting local businesses.

These tensions have come at an important moment. In September this year, 53 African leaders gathered in Beijing for the seventh Forum on China-Africa Cooperation (Focac), where President Xi Jinping unveiled a new pledge of $60bn in financing for the continent.

Many have described China’s relationship with Africa as neo-colonial, but it is a thoroughly contemporary strategy. It is also not clear that it is an entanglement that African nations need to enter into, in order to develop. What is true is that the US and former colonial powers are sore that they have missed the boat in Africa. For many years, the West framed Africa as a place of war, famine and disease. China, however, saw opportunity – in addition to its natural resources, Africa is the world’s fastest-growing continent and has a “youth bulge” that could pay great dividends in the future.

Back in January, I was in Gambia when US President Donald Trump made headlines by describing African nations as “s***holes”. This outrageous comment neatly underscored the US attitude to Africa. There is now recognition within the Trump administration that such views, and decisions to cut back USAID, were bombastic exercises in self-harm, and that Africa is, in fact, an important theatre for US interests.

In recent months, Mr Trump has been harshly critical of his predecessor Barack Obama’s record in Africa. Following the Focac meeting, the US said it would counter China’s influence by doubling its financing on the continent. There are also plans to embolden the Overseas Private Investment Corporation to involve itself in African business and infrastructure projects.

Still, these belated overtures pale in comparison to what China has brought to the table. Walking through Nairobi – or, indeed, Dakar, Johannesburg or Addis Ababa – it is clear that Africa is in the midst of a shift into a post-western era. In some ways China is still working out what sort of superpower it wants to be: a global investor, one dedicated to advancing its own geostrategic interests, or some combination of both. The West retains a huge advantage in terms of soft power – young people in Lagos emulate New York street style, US hip-hop is everywhere and Mr Obama’s face still adorns battered old buses in Nairobi’s shanty towns − but there are limits to that.

Many African leaders are clearly happy to be wooed by China, but the past few months have shown that the continent’s vibrant and vocal civil societies will not be forced into a marriage that they don’t want. If Africa is to achieve an equitable relationship with its latest benefactor, its best hope lies in the desire of its people to finally shape their own destiny.

Ismail Einashe is a journalist based in London and a Dart Center Ochberg fellow at Columbia University Journalism School. This article was supported by a grant from the Pulitzer Center on Crisis Reporting

Company profile

Name: Tharb

Started: December 2016

Founder: Eisa Alsubousi

Based: Abu Dhabi

Sector: Luxury leather goods

Initial investment: Dh150,000 from personal savings

 

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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COMPANY PROFILE
Name: ARDH Collective
Based: Dubai
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Sector: Sustainability
Total funding: Self funded
Number of employees: 4
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Rated: 3.5/5
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AT4 Ultimate, as tested

Engine: 6.2-litre V8

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COMPANY PROFILE
Name: Airev
Started: September 2023
Founder: Muhammad Khalid
Based: Abu Dhabi
Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 
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Director: Kangana Ranaut

Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry 

Rating: 2/5

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The specs: 2019 Haval H6

Price, base: Dh69,900

Engine: 2.0-litre turbocharged four-cylinder

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Power: 197hp @ 5,500rpm

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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
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Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.
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WHAT IS A BLACK HOLE?

1. Black holes are objects whose gravity is so strong not even light can escape their pull

2. They can be created when massive stars collapse under their own weight

3. Large black holes can also be formed when smaller ones collide and merge

4. The biggest black holes lurk at the centre of many galaxies, including our own

5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed